Charlemagne Capital Limited2013. 3. 25. · regional Latin American and East European funds in the...

Charlemagne Capital Limited

Annual Report and Consolidated Financial Statements For the year ended 31 December 2012

ISIN No. KYG2052F1028

Charlemagne Capital Limited Annual Report and Consolidated Financial Statements For the year ended 31 December 2012

CONTENTS

Page(s)

Five Year Financial Highlights 2

Current year Highlights 3

Company Information 4

Chairman's Statement 5

Financial and Operating Review 6-8

Board of Directors 9-10

Report of the Directors 11-13

Corporate Governance Report 14-15

Directors’ Remuneration Report 16-17

Statement of Directors’ Responsibilities 18

Report of the Independent Auditors 19

Audited Financial Statements

Consolidated Statement of Comprehensive Income 20

Consolidated Statement of Financial Position 21

Consolidated Statement of Changes in Equity 22

Consolidated Cash Flow Statement 23

Company Statement of Financial Position 24

Notes to the Financial Statements 25-46

Directors of Principal Subsidiaries 47


2

FIVE YEAR FINANCIAL HIGHLIGHTS

Year Ended 31 December 2008 2009 2010 2011 2012

Assets under Management at year end

US$2.18bn US$3.05bn US$3.48bn US$2.33bn US$2.63bn

Management Fees US$39.5m US$18.6m US$22.2m US$22.6m US$20.5m

Performance Fee and other Revenues excluding non-recurring items*

US$4.2m US$5.2m US$6.3m US$5.2m US$10.2m

Operating Profit before taxation and non-recurring items* US$16.6m US$5.7m US$6.7m US$6.1m US$5.1m

Net Profit after taxation and non-controlling interest US$13.9m US$5.7m US$8.6m US$3.3m US$1.9m

Earnings per share attributable to ordinary shareholders US4.9 cents US2.0 cents US3.1 cents US1.2 cents US0.7 cents

* In the opinion of the Directors, stating revenues and operating earnings before taxation excluding non-recurring items more accurately reflects the sustainable earnings of the Group and its ongoing activities.


3

CURRENT YEAR HIGHLIGHTS

• Assets Under Management – US$2.63 billion – an increase of 13.1%

• Operating Profit – US$5.1 million – a decrease of 16.4%

• Net Profit after Tax and Non-Controlling Interest – US$1.9 million – a decrease of 42.4%

• Earnings per share – 0.7 US cents per share – a decrease of 41.7%

• Management Fees – US$20.5 million – a decrease of 9.3%

• Performance Fees – US$9.0million – an increase of 83.7%

• Total Dividends paid and declared in respect of 2012 – US$2.8 million (2011: US$2.8 million) – dividend level maintained


4

COMPANY INFORMATION

EXECUTIVE DIRECTORS

J. A. Sutcliffe (Chief Executive) J. D. N. McAndry

A. L. Jones H. L. Jones

NON-EXECUTIVE DIRECTORS

M. P. Baer (Chairman)

J. J. van Duijn J. Mellon

Rt. Hon. Lord Lang of Monkton, PC

COMPANY SECRETARY

J. D. N. McAndry

REGISTERED OFFICE

Ugland House, P.O. Box 309, South Church Street, George Town, Grand Cayman, Cayman Islands, B.W.I.

MAILING ADDRESS

St Mary’s Court, 20 Hill Street, Douglas, Isle of Man, IM1 1EU

NOMINATED ADVISER

Nplus1 Singer Advisory LLP

One Bartholomew Lane, London EC2N 2AX

AUDITORS

KPMG Audit LLC 41 Athol St, Douglas, Isle of Man, IM99 1HN

PRINCIPAL BANKERS

Barclays International

Victoria St, Douglas, Isle of Man, IM99 1AJ

SOLICITORS

Stephenson Harwood One, St Paul’s Churchyard, London EC4M 8SH

REGISTRARS

Capita IRG (Offshore) Limited

12 Castle Street, St Helier, Jersey JE2 3RT

CREST DEPOSITARY

Capita IRG Trustees Limited The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.


5

Chairman’s Statement 2012 was generally a strong year for performance, with the Global Emerging Market funds and the key regional Latin American and East European funds in the 1st and 2nd quartiles at the close of the year. Notably, the Emerging Market Equity Income and Growth strategy has been a top quartile performer since its inception. The Latin American strategy continued its strong long term performance and was the beneficiary of net inflows during the year. The OCCO fund completed a successful fund-raising during this year. The sub-advisory White Label business experienced consistent net outflows throughout the year, principally from US retail clients. The Group’s institutional mandates experienced significant outflows in the first quarter; however we are pleased to report a new US$130 million institutional Latin American mandate which was acquired in June. In addition we have been experiencing net inflows from existing mandates in the second half and, towards the end of the year, the Group was awarded two new mandates for Eastern Europe and GEMS, which will be funded in the second quarter of 2013. Global markets reversed last year’s trend and posted significant positive returns for the year with Emerging Markets outperforming developed markets for the first time in two years. The MSCI Emerging Markets Index ended the year up by 18.2% following a strong second half. With increased levels of confidence, investors were encouraged to take more equity risk and, as a result, inflows started to return to our asset class, with industry-wide reported inflows in 2012. The Group ended the year with Assets under Management (AuM) at US$2.6 billion, 13.1% higher than at the beginning. In the second half of the year, net inflows of US$129 million (compared with net outflows of US$150 million in the first six months) and 9.7% positive investment performance, led to an increase in AuM of 15.6% since June. Regular net management fee income for the year was lower than the previous year due to the lower average level of assets managed over the year as a whole. During a period of reduced levels of assets under management, we have taken measures to manage costs, which include reducing fixed costs, while continuing to strengthen our investment management capabilities and resources. I am pleased to report that overall the business was profitable during the year. Our stated intention and the policy of the Group is to continue to declare regular dividends to reflect the earnings and cash flow of the Group. The Directors are of the opinion that the overall level of dividend of the previous year should be maintained. No dividend was declared at the interim and therefore an amount of US$2.8 million (1.0 cents per share) is now being declared. This will utilise US$0.9 million support from reserves. It has been a challenging year but the final quarter has produced very encouraging signs that real momentum for growth is now gathering. Inflows in the last period have been strong and have continued to be positive so far in 2013; investment performance has been good and we are in the process of finalising the details of new distribution agreements. We are particularly encouraged by the ongoing development of our income and growth strategy which we are confident can quickly provide a greater contribution to our business. This has grown from US$18 million at the start of 2012 to over US$80 million at the date of this report. The Group is focussed on adding new assets supported by strong performance of key strategies. Higher levels of AuM will result in the increasing utilisation of our operational base, which has the capacity to take on much greater volumes of business, and should therefore generate additional value for shareholders. The Group continues to hold the bulk of its assets in cash or liquid assets and has no borrowings. We are well positioned to take advantage of the recent upturn and grow our business accordingly. Finally, I wish to thank the staff at Charlemagne Capital for their effort and continued commitment. During this difficult period we have sought to ensure our focus has been on the best use of resources and the refining of our investment management process. The cooperation of all stakeholders has been paramount and we are looking forward to continuing to deliver superior investment solutions to our clients.

Michael Baer

26 March 2013


6

Financial and Operating Review Financial Results Profit, after taxation and minority interests, was US$1.9 million for the year ended 31 December 2012 compared with US$3.3 million in 2011. The results for the year reflect the average level of assets under management throughout the period compared with the previous year, and the changes in the underlying asset mix and related margins. AuM at year end stood at US$ 2.6 billion, 13.1% higher than at the beginning of the period, with the contributions to this increase in AuM of US$304 million being generated equally by the long only and OCCO (long short) parts of the business. The new money raised for OCCO this year was at a higher margin than previous fund raising. Fee income arising from this source is subject to a minority interest therefore is not fully retained within the Group. Operating profit before tax and non-recurring items was US$5.1 million, down 16.4% on the previous year. Although AuM at year end was higher than at the beginning of the period, the main impact of inflows and positive performance was in the second half, and the last quarter in particular. This was in contrast to the previous year when there was a significant fall in AuM in the second half. Therefore average AuM for the year as a whole was 20% lower compared to the previous year. Revenue from net management fees in the period decreased by 9.3% from the prior year to US$20.5 million (2011: US$22.6 million). The Group’s net management fee margin increased to 85 basis points (“bps”) by the end of the year (2011: 78 bps) due to the changes in relative weightings in different products, principally a reduction in lower margin institutional funds combined with the increase in the OCCO fund assets. The overall investment performance of funds managed and advised by the Group was positive in US Dollar terms for three out of the four quarters and for the year as a whole. Crystallised net performance fees of US$9.0 million (2011: US$4.9 million) were earned during the year. The majority of this fee was earned on the Group’s OCCO product with some contribution from Specialist funds. The remainder of the performance fee paying funds managed by the Group are below required thresholds and are unlikely to generate performance fees in 2013. Operating expenses for the year were US$25.6 million (2011: US$21.8 million) with fixed costs showing a reduction of 9%, the increase being due to profit related compensation for the OCCO division and share option costs. This has also impacted the Group’s operating profit margin for the year which fell to 16.5% (2011: 21.7%). Exchange rate movements have had minimal effect on costs. After taxation and other income and expenditure, earnings per share attributable to shareholders were 0.7 US cents per share (2011: 1.2 US cents per share) on a fully diluted basis. Cash generated by the group during the year was US$1.9 million. In the absence of unforeseen circumstances it has been the Directors’ intention that the bulk of cash generated will be returned to shareholders by means of dividends and share buy back programmes as appropriate. In respect of this financial year, the Directors consider it appropriate to support the level of dividend by utilising some of the Group’s cash reserves in addition to surplus cash generated in the year. Net assets attributable to shareholders have increased from US$26.2 million to US$27.8 million before payment of an interim dividend of 1.0 US cents per share which has been declared by Directors and will be paid on 26 April 2013 at a cost of US$2.8 million. The Group continues to hold substantial cash balances above that required for regulatory capital purposes. It is not proposed to recommend a final dividend. Interim dividends have been recommended by the board in order that the funds can be paid to shareholders more quickly than would otherwise be the case.


7

Financial and Operating Review (continued) Operations and Investment Review There has been an overall increase in AuM of US$304 million for the full year, comprising an increase in market values of US$326 million and net outflows from the Group’s products of US$22 million. Global markets posted positive returns for the year, particularly at the very start and towards the end of the year. Emerging markets ended the year ahead of developed markets and alongside this dedicated emerging market funds reported net inflows of US$49.5 billion. For the year as a whole, the best market performers included Turkey, Thailand and Mexico with three of the larger markets – China, Russia and Brazil – among the laggards. Investors started to believe that the US’s fiscal cliff would be avoided and that China’s economy was again accelerating. These factors, combined with continued low interest rates around the world, encouraged investors to take more equity risk. This benefited emerging markets after two years of underperformance. This underperformance has been partly due to rising statutory wages in several countries. These have lowered corporate profits, although we consider in the long run that the process of higher wages is part of the refocusing of emerging markets from export dependency to domestic demand. We seek to invest in quality businesses at reasonable valuations both in larger and smaller companies, including those not in the benchmark. After the headwinds of 2011, this approach paid off in 2012, with investors increasingly differentiating between those companies which produce good returns to shareholders and those that do not, even if some of the latter group might appear superficially cheap. The results were seen in an improved performance for nearly all of our strategies over the year. We have long considered that this approach pays off in the long run and will lead to inflows in the coming year. We also continue to believe that emerging markets will outperform developed markets in the next few years. Magna UCITS Funds Overall, 2012 saw net inflows into the magna range. The GEMS Dividend sub fund and the Latin American sub fund attracted net inflows of US$78 million between them for the year on the back of continued strong performance. The GEMS Dividend strategy has seen top quartile performance over the year and since inception. This strategy, which will reach its 3 year track record in June, provides the combination of a high level of income with the opportunity for growth in a low volatility portfolio of quality emerging market companies. At the end of 2012, there were nine sub-funds within the Magna Umbrella Fund with a total AuM of US$364 million (2011: US$260 million). OCCO The OCCO fund has grown from US$444 million at the end of 2011 to US$597 million as at the end of 2012 with net subscriptions of US$113 million during the year. The fund is again closed to new subscriptions for the time being. The fund earned performance fees of US$8.8 million in 2012.


8

Financial and Operating Review (continued) Operations and Investment Review (continued) Specialist This fund area comprises principally a range of Private Equity property funds. 2012 has seen further direct property investments completed in Brazil. Performance fees of US$0.2 million were earned in this category in 2012. It is not possible to predict when conditions may be such that asset sales can be made within the vehicles that would then lead to further such fees becoming payable. At the end of the year, Specialist Mandates had a total AuM of US$0.15 billion (2011: US$0.17 billion).

Institutional Business This category includes segregated accounts together with a range of pooled funds tailored to the needs of institutions and some sub-advisory/white label accounts. This category has seen an increase in asset values due to investment performance. At the start of the year the Group saw institutional redemptions, however a new Latin America mandate of US$130 million was awarded in June and there were net inflows of US$75 million into institutional mandates during the fourth quarter, though this was offset somewhat by outflows from white label accounts. No performance fees were generated during the year. At the end of the year, Institutional Mandates had a total AuM of US$1.53 billion (2011: US$1.45 billion).


9

Board of Directors

Michael Baer

Independent Non Executive Director and Chairman Michael was appointed Non-Executive Director and Chairman of Charlemagne Capital in March 2006. He is Chairman and Founder of Baer Capital Partners, a Dubai based Asset Management and Corporate Finance company which specializes in the Indian market. Before that, Michael was the Head of Private Banking and Member of the Executive Board at Julius Baer Group. He has over 20 years of experience in investment banking, trading and private banking in New York, London, Frankfurt, Tokyo, Hong Kong, and Zurich. Michael is a graduate of the Sloane School of Management at the Massachusetts Institute of Technology, where he currently serves on the Dean’s Advisory Council.

Jayne Sutcliffe Chief Executive

Jayne is responsible for the development and implementation of the Group’s overall strategy, new initiatives, corporate issues and the Group’s sales activities. Jayne became Group Chief Executive of Charlemagne Capital upon its launch in June 2000. Jayne began her career with Asian specialist Thornton Management before moving to Tyndall Holdings plc in 1988 to work on the development of an Asian and Emerging Markets operation. In 1990, she co-founded Regent Pacific Group Limited (“Regent”) and was responsible for establishing and running its European operations. Jayne graduated with a masters degree in Theology from Oxford University.

Jane McAndry (formerly Bates) Executive Director, Company Secretary

Jane joined Charlemagne as a Director of Charlemagne Capital (IOM) Limited in July 2007. She was appointed Group Company Secretary in August 2007 and Director in February 2008. She became Managing Director of the Group’s Isle of Man based subsidiaries from 1 April 2009. Jane previously spent seven years in senior roles with the Isle of Man Financial Supervision Commission. Prior to that, Jane was Legal Director of Intertrust (Isle of Man) Limited, part of an international tax planning and fiduciary group. She began her legal career in Edinburgh where she qualified as a Scottish Solicitor, and has wide ranging legal experience.

Adrian Jones

Executive Director

Adrian Jones is Operations Director of Charlemagne Capital (IOM) Limited, a position he has held since September 2008. He joined the Charlemagne Group in 1997 as Head of Settlements in the Isle of Man and, after periods in Trading and as Head of Operations, he relocated to London in 2005 to become Head of Middle Office. He returned to the Isle of Man in 2008 as Head of Operations. Before joining the Group he was a Dealer at Standard Bank Stockbrokers. Mr Jones started his career in 1990 at Clerical Medical International. He is a Fellow of the Chartered Institute for Securities and Investments.

Lloyd Jones Finance Director

Lloyd Jones joined Charlemagne as Chief Financial Officer in April 2010. He took over day to day responsibilities for the Group's finance operations with effect from 1 June 2010 and was appointed a director of Charlemagne Capital (IOM) Limited, the Group's Isle of Man operating subsidiary, on 1 January 2011. Mr Jones is a Chartered Accountant (FCA) and has an MBA in Finance; he also has extensive financial and operational expertise at a senior level, most recently as Finance Director and Head of Operations at Nedgroup Investments (IOM) Limited.


10

Board of Directors (continued)

Jacob Johan (Jaap) van Duijn Independent Non Executive Director

Jaap was appointed Non-Executive Director and the senior Independent Director of Charlemagne Capital from 1 March 2006. Until 2005 he was chief strategist of Robeco Group, where as chief investment officer he had previously been a member of the group executive committee and board of Directors until 2003. He currently holds a wide range of appointments, including board member and chairman of the Audit Committee of Wageningen University, board member and Audit Committee member of the Dutch National Green Fund, and member of the supervisory board of Value8, a Dutch investment firm listed on the Amsterdam stock exchange.

James Mellon Non Executive Director

Jim was appointed Non-Executive Director of the Company in August 1997 and was Chairman from that time until March 2006. He began his career with GT Management in the US and in Hong Kong and later became the co-founder and managing Director of Thornton Management (Asia) Limited based in Hong Kong and was a Director of Tyndall Holdings plc. He is chairman and co-founder of Regent. He is currently a Director of Fixed Odds Group Limited, Webis Holdings plc, Burnbrae Limited, Sleepwell Hotels Limited, Speymill Property Managers Limited and various other investment companies. James Mellon has a masters degree in Politics, Philosophy and Economics from Oxford University.

Rt Hon Lord Lang of Monkton, PC Independent Non Executive Director

Ian Lang was appointed a Non-Executive Director of Charlemagne Capital from 1 March 2006. From 1979 to 1997 he was a Member of Parliament and served as Secretary of State for Scotland and President of the Board of Trade and Secretary of State for Trade & Industry. In 1997 he was made a life peer. He is a former Director of General Accident plc, CGU plc and the Automobile Association. Lord Lang is currently Chairman of Marsh and McLennan Companies Inc.. He is also Chairman of the UK Prime Minister’s Advisory Committee on Business Appointments.


11

Report of the Directors

The Directors herein present their annual report and the consolidated financial statements of the Group for the year ended 31 December 2012.

Principal Activities

The Group's principal activities consist of asset management and related activities.

Results and Dividends

The Group's profit for the year ended 31 December 2012 and the state of affairs of the Group and the Company at that date are set out in the financial statements on pages 20 to 24 and notes on pages 25 to 46.

An interim dividend of 0.6 US cents per ordinary share in respect of the year ended 31 December 2011 was paid on 27 April 2012 to those shareholders on the register on 30 March 2012. This dividend was distributed from retained earnings during 2012.

An interim dividend of 1.0 US cents per ordinary share in respect of the year ended 31 December 2012 will be paid on 26 April 2013 to those shareholders on the register on 5 April 2013.

Summary Financial Information

The results and the assets and liabilities of the Group for the current and the last two financial years (extracted from the audited financial statements) are set out below in summary:-

Results For the year ended For the year ended For the year ended 31 December 2012 31 December 2011 31 December 2010 US$’000 US$’000 US$’000 Revenue 30,708 27,844 28,450 Operating Profit 5,080 6,054 6,664 Net performance fees/share of profits from jointly controlled entity - - 3,752

Profit before tax 5,080 6,054 10,416 Taxation 27 (413) (379) Profit after tax 5,107 5,641 10,037 Non-controlling interests (3,217) (2,310) (1,469) Net profit from ordinary activities 1,890 3,331 8,568 Assets and liabilities Property and equipment 264 378 345 Current assets 43,712 37,757 39,021 Total assets 43,976 38,135 39,366 Total liabilities 12,940 9,620 10,240 Net assets 31,036 28,515 29,126


12

Report of the Directors (continued)

Subsidiaries

Particulars of the Company’s subsidiaries are set out in note 14 to the financial statements.

Property and equipment

Details of movements in property and equipment of the Group during the year are set out in note 13 to the financial statements.

Borrowings

The Group had no bank borrowings as at 31 December 2012 (2011: Nil).

Share Capital and Share Options

Details of the movements in the Company’s share capital and share options during the year are set out in notes 20 and 22 respectively to the financial statements.

Details of Share Repurchases

During the year ended 31 December 2012, the Company did not repurchase any of its own shares for cancellation (2011: nil).

Pre-Emptive Rights

There are no provisions for pre-emptive rights under the Company’s Articles of Association or the Companies Law of the Cayman Islands which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders, except as disapplied by a resolution of the Company in General Meeting.

Reserves

Details of movements in the reserves together with details of their availability for distribution, as calculated in accordance with the Companies Law of the Cayman Islands, are set out in the Consolidated Statement of Changes in Equity and note 21 to the financial statements.

Directors

The Directors of the Company who held office during the year and to date were:-

Michael Baer (Chairman)* Jaap van Duijn*

Lord Lang of Monkton* James Mellon* Jayne Sutcliffe Jane McAndry Adrian Jones Lloyd Jones

* non-executive Director


13

Report of the Directors (continued)

Directors’ Interests in Contracts

Except as disclosed in note 6 to the financial statements, no Director had a beneficial interest in any material contract to which the Company or any of its subsidiaries was a party during the year.

Directors’ Service Contracts

No Director has a service contract with the Company which is not terminable by the Company within six months without payment other than statutory compensation.

Substantial Shareholders

In addition to the holdings of certain Directors’ as disclosed on page 17, the Company has been made aware of the following positions in the equity of Charlemagne Capital Limited which exceed 3% of the Ordinary Shares in issue as at 26 March 2013.

Number of Ordinary

Shares Percentage of Issued Capital

Blackrock Inc. 14,439,649 5.1% AXA S.A. and related parties 14,310,000 5.0% Majedie Asset Management Limited 14,071,878 5.0% Regatta Invest Corporation 10,000,000 3.6% Paul J. Isaac 8,927,889 3.2%

Auditors KPMG Audit LLC retire and, being eligible, offer themselves for re-appointment. A resolution for the reappointment of KPMG Audit LLC is to be proposed at the forthcoming annual general meeting.

On behalf of the Board

Jane McAndry Director & Company Secretary 26 March 2013


14

Corporate Governance Report

For the year ended 31 December 2012 In 2006, the Company gained admission to trading on AIM. As an AIM company, the Company is not required to comply with The UK Corporate Governance Code (the “Code”). Nevertheless, the Company seeks to comply with it as far as is practicable having regard to its size and nature and the current stage of its development. The Board of Directors The Board currently consists of eight Directors of whom four are Executive and four are Non-Executive, including the Chairman. The posts of Chairman and Chief Executive are held by different Directors with Jaap van Duijn as the senior Non-Executive Director. All Directors are required to submit themselves for re-election at least once every three years. The Board meets regularly, provides strategic direction to management and has a schedule of specific matters reserved for board decision. In particular the Board is responsible for:

• Setting the Company’s and Group’s strategy; • Development of new areas of business; • Formation, acquisition and disposals of subsidiaries or other assets over 10 per cent of net assets or profits of

the Group (whichever is the higher); • Approval of capital projects involving more than 3 per cent of net assets or profits of the Group (whichever is the

higher); • Communications with shareholders and the stock market; and • Annual consideration of the effectiveness of internal controls.

The Board is supplied with appropriate information to allow it to perform its duties. All Directors may take independent professional advice at the expense of the Company in performing their duties. The Directors are aware of the risks inherent in the Group’s business and understand the importance of identifying and evaluating these risks. The Board has adopted procedures and controls to enable it to manage these risks. The Isle of Man Financial Supervision Commission is considered to be the lead regulator in relation to the Group’s regulated activities. Non-Executive Directors The Board includes Non-Executive Directors who bring strong, independent judgement, knowledge and experience to the Board’s deliberations. The Board has determined that three of its number, Michael Baer, Jaap van Duijn and Lord Lang, can be regarded as independent for the purposes of the Combined Code. James Mellon, the fourth non-executive Director, has interests in a sufficient number of shares (as set out on page 17) not to be considered by the Board to be independent for the purposes of the Code. The Non-Executive Directors each have a letter of appointment, which sets out the terms of their appointment and their expected time commitment. Their fees are determined by the Board. Board Committees The Board has established an Audit Committee and a Remuneration Committee with formally delegated duties, responsibilities and terms of reference. For the time being the Board has not established a Nominations Committee but has committed to do so at an appropriate future date. The Board also has the power to establish ad hoc committees as necessary to allow executives to make immediate decisions on matters reserved to the Board within strict guidelines approved by the Board in advance.


15

Corporate Governance Report (continued) Audit Committee The Audit Committee is chaired by Jaap van Duijn and its other members are Michael Baer and Lord Lang. All of the members of the Committee are Non-Executive Directors. The Audit Committee meets at least three times each year and Executive Directors and senior management may be invited to attend all or part of the meetings. The external auditors of the Company attend the meetings and have unrestricted access to the Committee and its Chairman. The purpose of the Audit Committee is to assist the Board in discharging its corporate governance responsibilities in relation to the Company’s external auditors and to provide assurance over the reliability and appropriateness of the disclosure in the financial statements. The Audit Committee also reviews the effectiveness of internal controls. Remuneration Committee

The Remuneration Committee was chaired by Lord Lang during the year. The membership of the Committee remains as Michael Baer, Jaap van Duijn, Lord Lang and Jayne Sutcliffe. The terms of reference for this committee state that it is only quorate if at least two Independent Non-Executive Directors are present thus ensuring that all recommendations are made independently of the Executives. The Remuneration Committee meets as required but at least twice in each year. It considers all material elements of remuneration policy, remuneration and incentives of Executives and senior employees with reference if necessary to independent research and professional advice. It also reviews all allocations to employee share related incentive schemes. Recommendations are made by the Committee to the Board on the framework for executive remuneration and its cost. The Board is then responsible for ratifying the remuneration packages of individual Directors and senior employees together with share related incentive allocations for all employees. The Directors are aware that the Committee structure of the Board is not fully in compliance with the Code. However, they consider that the structure which is in place is appropriate for an entrepreneurial company where a significant proportion of the equity is owned by employees, Directors and their related interests.


16

Directors’ Remuneration Report

For the year ended 31 December 2012 Employee compensation is based on the principles that bonus pools will be predominantly proportionate to profits and that equity participation is available to staff at all levels commensurate with their grade, thus ensuring that all staff members have the incentive to work towards the same profitability goals and there is an alignment of interests between employees and external shareholders. Executive Directors Executive Directors’ salaries are reviewed annually by the Remuneration Committee. Consideration is given to the full compensation package including allocations from the bonus pool arrangements, which may in certain circumstances be allocated to personal pension plan arrangements. Other than Jayne Sutcliffe, Executive Directors may receive share based incentives. The Executive Directors received healthcare membership for themselves and their immediate family. The Group currently provides the opportunity for Isle of Man based Executive Directors and employees to participate in a defined contribution Group Personal Pension Plan. The Executive Directors are employed under continuing contracts of employment that can be terminated by either party under notice provisions of up to six months with no additional provision for compensation payable by the Company on early termination beyond the minimum notice period. Non-Executive Directors The contracts of the Non-Executive Directors can be terminated by either party under notice provisions of one month with no provision for compensation payable by the Company on early termination. The Non-Executive Directors received the fees disclosed below and do not receive any other group benefits. Statement of Directors’ Remuneration The total remuneration and fees of the Directors who held office during the year ended 31 December 2012 are set out below: Emoluments 2012

US$000 Emoluments 2011

US$000 NON-EXECUTIVE Michael Baer 125 125 Jaap van Duijn 63 63 Lord Lang of Monkton 63 63 James Mellon 50 50 EXECUTIVE Jayne Sutcliffe 454 994 Jane McAndry 227 358 Adrian Jones 244 277 Lloyd Jones 175 175 Further details on Directors’ Remuneration are set out in note 5 to the financial statements.


17

Directors’ Remuneration Report (continued) Directors’ Share Interests The Directors who held office during the year and at 31 December 2012 were interested in the equity of Charlemagne Capital Limited as set out below. Ordinary shares of US$0.01 each

Number of Shares and Nature of Interest Directors Notes Personal

Interest Other

Interests Option

Entitlements Total Interest

2012 Total Interest

2011 James Mellon A, B & C 5,668,163 50,001,334 - 55,669,497 55,669,497 Jayne Sutcliffe D - 31,508,519 - 31,508,519 31,508,519 Lord Lang of Monkton 100,000 - - 100,000 100,000 Michael Baer 500,000 - - 500,000 265,341 Jane McAndry E, F 159,196 - 1,435,261 1,594,457 225,863 Adrian Jones F 234,196 - 1,401,928 1,636,124 234,196 Lloyd Jones F,G - - 1,515,112 1,515,112 113,184

A. a number of shares under “other interests” are held by Galloway Limited, which is indirectly wholly owned by the trustee of a settlement under which James Mellon has a life interest.

B. a number of shares under “other interests” are held by Indigo Securities Limited, which is indirectly wholly owned by the trustee referred to in Note A above.

C. a number of shares under “other interests” are held on behalf of Burnbrae Limited, which is indirectly wholly owned by the trustee referred to in Note A above.

D. shares under “other interests” are held on behalf of the trustees of discretionary trusts, under which Jayne Sutcliffe and members of her family may become beneficiaries.

E. a number of shares under “option entitlements” refer to a grant of options made in March 2008 which, subject to performance conditions being met, will become eligible for exercise in March 2013.

F. a number of shares under “option entitlements” refer to a grant of options made in May 2012 which, subject to service conditions being met, will become eligible for exercise from May 2014 onwards.

G. a number of shares under “option entitlements” refer to a grant of options made in March 2011 which, subject to service conditions being met, will become eligible for exercise from March 2013.


18

Statement of Directors’ Responsibilities in Respect of the Directors’ Annual Report and the Financial Statements The Directors are responsible for preparing the Directors’ Annual Report and the Group and Parent financial statements in accordance with applicable law and regulations. As requested by the AIM Rules of the London Stock Exchange they are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and have elected to prepare the Parent company Financial Statement on the same basis. The financial statements are required by law to give a true and fair view of the state of affairs of the Group and parent company for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether they have been prepared in accordance with IFRSs as adopted by the EU; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group

and Parent Company will continue in business. The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time its financial position. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.


19

Report of the Independent Auditors

Report of the Independent Auditors, KPMG Audit LLC, to the members of Charlemagne Capital Limited

We have audited the financial statements of Charlemagne Capital Limited for the year ended 31 December 2012 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs), as adopted by the EU. This report is made solely to the Company’s members, as a body. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 18, the Directors are responsible for the preparation of financial statements that give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. Opinion on the financial statements In our opinion the financial statements give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the Group’s and Company’s affairs as at 31 December 2012 and of the Group’s profit for the year then ended;

KPMG Audit LLC Chartered Accountants Heritage Court 41 Athol Street Douglas Isle of Man IM99 1HN 26 March 2013


The notes on pages 25 to 46 form an integral part of these financial statements

20

Consolidated Statement of Comprehensive Income

Note Year ended Year ended 31 December 2012 31 December 2011 US$’000 US$’000 Revenue 4 30,708 27,844 Expenses Personnel expenses 5 (20,747) (16,422) Other costs (4,881) (5,368) Profit before tax 7 5,080 6,054 Taxation 9 27 (413) Profit after tax 5,107 5,641 Profit after Tax attributable to Non-Controlling Interests 3,217 2,310 Owners of the Company 1,890 3,331 Profit after tax 5,107 5,641 Other Comprehensive Income Foreign currency translation differences (17) (56) Total Comprehensive Income for the Year 5,090 5,585 Total Comprehensive income attributable to Non-Controlling Interests 3,217 2,310 Owners of the Company 1,873 3,275 Total Comprehensive Income for the Year 5,090 5,585 US$ US$ Earnings per share Basic 12 0.007 0.012 Diluted 12 0.007 0.012



21

Consolidated Statement of Financial Position

Note As at As at 31 December 2012 31 December 2011 US$’000 US$’000 Non-current assets Property and equipment 13 264 378 Total non-current assets 264 378 Current assets Current investments 15 1,939 1,640 Trade and other receivables 17 13,774 10,023 Taxation 33 - Cash and cash equivalents 18 27,966 26,094 Total current assets 43,712 37,757 Total assets 43,976 38,135 Issued share capital 20 2,804 2,804 Reserves 25,015 23,401 Shareholders’ equity 21 27,819 26,205 Non-Controlling Interest 3,217 2,310 Total equity 31,036 28,515 Current liabilities Trade and other payables 19 12,940 9,482 Taxation - 138 Total current liabilities 12,940 9,620 Total equity and liabilities 43,976 38,135 Approved by the Board of Directors on 26 March 2013. Lloyd Jones Jane McAndry Director Director



22

Consolidated Statement of Changes in Equity

Share Capital

Share Premium

Retained Earnings

Treasury Shares

Share Option

Reserve

Foreign Currency Exchange Reserve

Total attributable

to the Owners of

the Company

Non-Controll

ing Interest

Total Equity

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 At 1 January 2012 2,804 6,520 14,956 (1,882) 490 3,317 26,205 2,310 28,515 Comprehensive income for the period - - 1,890 - - (17) 1,873 3,217 5,090

Share based payment plans (note 22) - - (1,323) 1,705 1,022 - 1,404 - 1,404

Dividends - - (1,663) - - - (1,663) (2,310) (3,973)

At 31 December 2012 2,804 6,520 13,860 (177) 1,512 3,300 27,819 3,217 31,036

Share Capital

Share Premium

Retained Earnings

Treasury Shares

Share Option

Reserve

Foreign Currency Exchange Reserve

Total attributable

to the Owners of

the Company

Non-Controll

ing Interest

Total Equity

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 At 1 January 2011 2,804 6,520 16,316 (1,882) 526 3,373 27,657 1,469 29,126 Comprehensive income for the period - - 3,331 - - (56) 3,275 2,310 5,585

Share based payment plans (note 22) - - 20 - (36) - (16) - (16)

Dividends - - (4,711) - - - (4,711) (1,469) (6,180) At 31 December 2011 2,804 6,520 14,956 (1,882) 490 3,317 26,205 2,310 28,515



23

Consolidated Cash Flow Statement

Note Year ended Year ended 31 December 2012 31 December 2011 US$'000 US$'000 Operating Profit 5,080 6,054 Adjustments for: Depreciation 7,13 189 215 Exchange loss/(gain) on property and equipment - 2 Provision for unrealised (gain)/loss on foreign exchange contracts and investments 7 (346) 321

Share based option plan 1,404 (16) (Increase)/decrease in trade and other receivables (3,764) 2,968 Increase/(decrease) in trade and other payables 3,458 (659) Tax paid (144) (374) Net cash generated from operating activities 5,877 8,511 Investing activities Proceeds from sale of investments 113 259 Purchase of investments (70) (197) Purchase of property and equipment 13 (75) (250) Net cash used in investing activities (32) (188) Financing activities Dividend paid to non-controlling interest 14 (2,310) (1,469) Dividends paid 11 (1,663) (4,711) Net cash used in financing activities (3,973) (6,180) Net increase in cash and cash equivalents 1,872 2,143 Cash and cash equivalents at the beginning of the year 18 26,094 23,951 Cash and cash equivalents at the end of the year 18 27,966 26,094



24

Company Statement of Financial Position

Note As at As at 31 December 2012 31 December 2011 US$'000 US$'000 Non-current assets Interests in subsidiaries 14 2,821 2,821 Total non-current assets 2,821 2,821 Current assets Trade and other receivables 17 115 224 Amounts due from subsidiaries 25 13,519 3,115 Cash and cash equivalents 18 7,153 13,358 Total current assets 20,787 16,697 Total assets 23,608 19,518 Issued share capital 20 2,804 2,804 Reserves 21 6,924 8,279 Shareholders’ equity 21 9,728 11,083 Current liabilities Trade and other payables 19 50 85 Amounts due to subsidiaries 25 13,830 8,350 13,880 8,435 Total equity and liabilities 23,608 19,518 Approved by the Board of Directors on 26 March 2013. Lloyd Jones Jane McAndry Director Director


25

Notes to the Financial Statements

1. The Company

Charlemagne Capital Limited (formerly Regent Fund Management (Cayman) Limited and Regent Europe Limited) was incorporated in the Cayman Islands as an exempt company with limited liability (registered number CR-75327) on 29 July 1997. The Company’s registered office is at P.O. Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, British West Indies. The consolidated financial statements of the Company for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the “Group”).

2. Basis of Preparation

Statement of Compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (EU). The financial statements were authorised for issue by the Directors on 26 March 2013.

Basis of Measurement

The consolidated financial statements are prepared on the historical cost basis except for the following that are stated at their fair value: financial instruments at fair value through profit or loss including derivative financial instruments. Recognised assets and liabilities that are hedged are stated at fair value in respect of the risk that is hedged.

Functional and Presentation Currency

The Company’s shares are issued in United States Dollars (“US Dollars”) as the US Dollar is a more widely recognised currency internationally than the local currency of the Cayman Islands. The functional and presentation currency of the Parent Company and subsidiary financial statements is US Dollars and not Cayman Islands Dollars reflecting the fact that the transactions are denominated in US Dollars.

Use of Estimates and Judgements

The preparation of financial statements in conformity with IFRS, as adopted by the EU, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in note 26. Changes in Accounting Policies

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group.


26

Notes to the Financial Statements (continued)

3. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by the Group entities.

Basis of Consolidation

Subsidiaries

Subsidiaries are those enterprises controlled by the Group. Control exists where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Jointly controlled entities

Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement, and are accounted for using the equity accounting method in the consolidated financial statements.

Transactions eliminated on consolidation

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Investment in funds managed by Charlemagne Capital Group companies

Certain Group companies, from time to time, purchase shares in funds managed by other Charlemagne Capital Group companies. Such holdings can amount to over 20% of the issued share capital and occasionally more than 50%. Those holdings over 50% of the issued share capital, are treated as subsidiaries. Those holdings which are over 20% but not more than 50% of the issued share capital are treated as associates and equity accounted in the consolidated financial statements for the Group. No holdings of over 20% but below 50%, and no holdings of over 50% in Charlemagne managed funds existed at 31 December 2012 or 2011.

Foreign Currency

Foreign currency transactions

Transactions in foreign currencies are translated to US Dollars at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to US Dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to US Dollars at the foreign exchange rate ruling at the date of the transaction.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to US Dollars at foreign exchange rates ruling at the reporting date. The income and expenses of foreign operations are translated to US Dollars at the foreign exchange rates at the dates of the transactions. Foreign currency differences are recognised in other comprehensive income, and presented in the “foreign currency exchange reserve” in equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency exchange reserve is transferred to profit or loss.


27


3. Significant Accounting Policies (continued)

Derivative Financial Instruments

The Group uses derivative financial instruments including forward exchange contracts to manage its exposure to foreign exchange, interest rate and equity market risks arising from operational, financing and investment activities and for trading purposes.

Derivative financial instruments are recognised initially at fair value; any attributable transaction costs are recongised in profit or loss as incurred. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss. However, where derivatives qualify for hedge accounting, recognition of the resultant gain or loss depends on the nature of the item being hedged (see Cash flow hedges below).

Cash flow hedges

Where a derivative is designated as a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative are recognised in other comprenhensive income and presented in the hedging reserve directly in equity. The amount recognised in equity is removed and recognised in profit or loss in the same period as the hedged cash flows affect profit or loss under the same profit or loss line item as the hedged item. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in the profit or loss.

If the derivative expires or is sold, terminated, or exercised, or no longer meets the criteria for cash flow hedge accounting, or the designation is revoked, then hedge accounting is discontinued prospectively and the amount recognised in equity until the forecast transaction affects profit or loss. If the forecast transaction is no longer expected to occur, then hedge accounting is discontinued and the balance in equity is recognised immediately in profit or loss.

Property and Equipment

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses.

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of items of property and equipment taking into account the items residual value. The estimated useful lives are as follows:

Furniture and fixtures 5 years

Computer equipment 3 years

Other equipment 4 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date.

Investments at fair value through profit or loss

Classification and measurement

An instrument is classified at fair value through profit or loss if it is classified as held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss. All investments are designated at fair value through profit or loss, except for derivative financial instruments which are classified as held for trading.


28



Investments (continued)

Recognition and derecognition

The Group recognises financial assets at fair value through profit or loss on the date it commits to purchase the instruments. From this date any gains and losses arising from changes in fair value of the assets are recorded. These assets are derecognised when the contractual rights to receive cash flows from the assets have expired or when the Group has transferred the right to receive the contractual cash flows in a transaction in which substantially all risks and rewards of ownership are transferred.

Fair value measurement principles

The value of financial instruments is based on their quoted market bid price, where available, at the balance sheet date without any deduction for transactions costs. If a quoted market price is not available on a recognised exchange or from a broker/dealer for non-exchange traded financial instruments, the fair value of the instrument is estimated by the Board of Directors.

The following represents the fair value hierarchy of financial instruments measured at fair value in the statement of financial position. The hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.

Trade and Other Receivables

Trade and other receivables are measured at amortised cost less impairment losses.

Trade and Other Payables

Trade and other payables are measured at amortised cost.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits. For the purpose of the statement of cash flows, cash and cash equivalents would be presented net of bank overdrafts if any existed.

Impairment of Non Financial Assets

The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. All impairment losses and reversals are recognised in profit or loss.

Share Capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of tax effects.


29



Share Capital (continued)

Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a change in equity. Repurchased shares are classified as cancelled shares and presented as a deduction from total equity.

Treasury shares

Shares issued to the Charlemagne 2005 Employee Benefit Trust (note 22) are accounted for as treasury shares within equity (see note 20).

Dividends

Dividends are recognised as a liability in the year in which they are declared and approved.

Revenue Recognition

Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit or loss as follows:-

(a) investment management, administration and advisory fees contractually receivable by the Group are recognised in the year in which the respective fees are earned. Performance fees arising upon the achievement of specified targets are recognised at the respective funds' year-ends, when such performance fees are confirmed as receivable, or when there is a crystallising event, including but not limited to, redemption of shares against which performance fees have been accrued;

(b) profit or loss on sale of investments is recognised when title is passed;

(c) interest is recognised on a time apportioned basis using the effective interest rate;

(d) dividend income from unlisted investments is recognised when the shareholder's right to receive payment is established. Dividend income from listed investments is recognised when the share price of the investment turns ex-dividend;

(e) revenue related to provision of services is recognised on an accruals basis.

Operating Lease Payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.

Employee Benefits

Obligations for contributions to employees’ International Pension Plans are recognised as an expense in profit or loss as incurred. Obligations to the Charlemagne 2005 Employee Benefit Trust are recognised as an expense in profit or loss to the extent that these have been provisionally allocated to discretionary revocable sub-trusts of which certain Directors and employees of the Group may become beneficiaries.

In common with other groups which have initiated employee benefit trusts, from time to time the Group may receive inquiries from revenue authorities regarding taxation aspects. It is the policy of the Group to account for any taxation due as a result of such inquiry in the year in which the substance of any settlement becomes probable.


30



The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense, with a corresponding increase in liabilities, over the period the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profit or loss.

The fair value of employee stock options is measured using a Black-Scholes or binomial lattice model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility, weighted average expected life of the instruments (based on general option holder behaviour), expected dividends, and a risk-free interest rate. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

Income Tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. A deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefit will be realised.

From time to time the Group receives inquiries from revenue authorities into its taxation affairs, as is common for entities operating international transfer pricing policies. It is the policy of the Group to account for any taxation due as a result of such inquiry in the year in which the substance of any settlement become probable.

Investment in Subsidiaries and Associates

The Company’s investments in the subsidiaries and associates are stated at cost less impairment losses.

Comparative Figures

Where necessary, comparative figures have been adjusted to conform to changes in presentation for the current year.

Earnings per Share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.


31


4. Revenue

Year ended Year ended 31 December 2012 31 December 2011 US$'000 US$'000 Fund management and related fees, net of rebates 20,495 22,592 Performance fees 9,040 4,904 Investment profit/(loss) on assets designated at fair value through profit or loss 346 (321) Other income 827 669 30,708 27,844

5. Personnel Expenses

Year ended Year ended 31 December 2012 31 December 2011 US$'000 US$'000 Salaries 9,041 9,828 Performance related bonuses 8,134 5,329 Share Based Incentive Plans (see note 22) 1,503 (329) Compulsory social security contributions 2,069 1,594 20,747 16,422

Year ended Year ended Directors’ Emoluments 31 December 2012 31 December 2011 US$'000 US$'000 Fees 301 301 Short-term employee benefits 1,059 1,746 Pension contributions 41 58 1,401 2,105

The highest paid Director had emoluments of US$0.45 million (2011: US$0.99 million).

The number of employees of the Group as at the end of the year was 61 (2011: 66) full time equivalent.

The Group operates a discretionary bonus scheme, as approved by the Board, which is based on the Group’s divisional profit before tax. Bonuses are accounted for in the financial year in which the bonus is earned.

In 2005 the Group created an employee benefit trust, the Charlemagne 2005 Employee Benefit Trust (“EBT”). The EBT is controlled by an independent Trustee (the “Trustee”). The EBT was created in order to motivate and retain the Group’s Directors and employees, each of whom is a potential beneficiary from the trust. Under UK tax legislation, certain UK income tax and social security obligations can be imposed on the Group in relation to these arrangements. The Group’s EBT arrangements provide that the Trustee must retain sufficient sums to allow such liabilities to be met. During 2011 the UK Treasury published legislation that further impacts upon EBT arrangements. Based upon advice received, the Board remains of the view that no liabilities to the Group exist in relation to these EBT arrangements. However the Board will continue to monitor the position in the light of the new legislation and the UK Tax Authorities’ actions in relation to similar structures. No contributions have been made to the EBT during this or the prior year.


32


6. Related Party Transactions

Identity of related parties

The Group is related to its subsidiaries (note 14), and to its Directors and executive officers.

Transactions with Directors and executive officers

As at 31 December 2012 Directors of the Company and their immediate interests controlled 31% (2011: 31%) of the voting shares of the Company. The Directors’ Remuneration Report on pages 17 and 18 gives details of share interests and remuneration.

Summary of transactions

The following is a summary of transactions with related parties during the current and prior years. All such transactions were entered into in the ordinary course of business.

a. Approximately 74% (2011: 60%) of the turnover from investment management, administration, performance incentive fees, advisory fees and commissions is derived from funds over which the Directors consider the Group has influence by virtue of its management, administration and advisory roles.

b. Certain Directors and the Company have shareholdings in certain funds managed by Charlemagne Capital Group companies.

c. During 2009 the Group established a subsidiary entity and entered into an economic interest agreement with this entity in respect of one of the management contracts held by the Group. An employee of the Group holds a 49.9% minority interest in the shares of this entity and has an option to acquire a further 12.6% of the shares in issue (see notes 14 and 22).

7. Profit from Operations

The Group's profit from operations was arrived at:- Year ended Year ended 31 December 2012 31 December 2011 US$'000 US$'000 After charging or (crediting): Revenue Items Unrealised (profit)/loss on current investments (346) 321 Interest income (157) (130) Net foreign exchange gain (151) (26) Expense Items Depreciation 189 215 Auditors' remuneration 146 146 Operating lease rental on property 643 664


33


8. Segment Reporting

Year to 31 December 2012 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Magna OCCO Institutional Specialist Other Total Net Management Fees 3,218 8,046 7,536 1,695 - 20,495 Net Performance Fees (17) 8,838 - 219 - 9,040 Return on Investment - - - - 346 346 Other Income - - - - 827 827

Segment Revenue 3,201 16,884 7,536 1,914 1,173 30,708 Segment Result 2,689 8,714 7,108 1,771 1,173 21,455 Unallocated Expenses (16,375) Results from Operating Activities 5,080 US$m US$m US$m US$m US$m US$m Asset under Management at Beginning of Year 260 444 1,452 172 - 2,328 Net Subscriptions 53 113 (183) (5) - (22) Net Performance 51 40 257 (22) - 326 Asset under Management at End of Year 364 597 1,526 145 - 2,632

Year to 31 December 2011 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Magna OCCO Institutional Specialist Other Total Net Management Fees 4,068 5,714 11,037 1,773 - 22,592 Net Performance Fees 123 4,757 23 1 - 4,904 Return on Investment - - - - (321) (321) Other Income - - - - 669 669 Segment Revenue 4,191 10,471 11,060 1,774 348 27,844 Segment Result 3,465 6,342 10,116 1,669 210 21,802 Unallocated Expenses (15,748) Results from Operating Activities 6,054 US$m US$m US$m US$m US$m US$m Asset under Management at Beginning of Year 589 308 2,343 242 - 3,482 Net Subscriptions (77) 116 (419) 6 - (374) Reorganisation (156) - 151 (23) - (28) Net Performance (96) 20 (623) (53) - (752) Asset under Management at End of Year 260 444 1,452 172 - 2,328

In accordance with IFRS 8 Operating Segments, the Group presents segment information in respect of its business segments that is consistent with information reviewed by management and based on the internal reports regularly reviewed by the Group’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them.


34


9. Taxation

Recognised in the income statement Year ended Year ended 31 December 2012 31 December 2011 US$’000 US$’000 Current tax expense: Current year (27) 414 Over provided in prior years - (1) Total income tax (refund)/ expense (27) 413

Reconciliation of effective tax rate Year ended Year ended 31 December 2012 31 December 2011 US$’000 US$’000 Profit before tax 5,080 6,054

Income tax using the domestic corporation tax rate 0% - 0% - Effect of different tax rates in foreign jurisdictions (0.53%) (27) 6.84% 414 Over provided in prior years 0% - (0.02%) (1)

(0.53%) (27) 6.82% 413 10. Profit Attributable to Shareholders

The net profit attributable to shareholders reflected in the financial statements of the Company itself amounts to US$0.3 million (2011: US$0.8 million).

11. Dividends

Year ended Year ended 31 December 2012 31 December 2011 US$'000 US$'000 Dividends per share of 0.6 US cents (2011: 1.7 US cents) 1,663 4,711

A second interim dividend of 0.6 US cents (GB0.3786p) per ordinary share in respect of the year ended 31 December 2011 was paid on 27 April 2012 to those shareholders on the register on 30 March 2012 and was distributed from retained earnings in 2012.

An interim dividend of 1.0 US cents (GB0.6583p) per ordinary share in respect of the year ended 31 December 2012 will be paid on 26 April 2013 to those shareholders on the register on 5 April 2013 and will be distributed from retained earnings in 2013.

12. Earnings Per Share

The calculation of basic earnings per share of the Group is based on the net profit attributable to shareholders for the year of US$1.89 million (2011: US$3.33 million) and the weighted average number of shares of 278,110,208 (2011: 277,123,431) in issue during the year.


35


12. Earnings Per Share (continued)

The calculation of diluted earnings per share of the Group includes options that have vested but not yet been exercised and the weighted average number of share options where the specified performance conditions have been satisfied, but the service criteria have not yet been met (note 22). The weighted average number of shares in respect of diluted earnings per shares is the same as the basic earnings per share calculations for the year.

Shares held by Sanne Trust Company Limited (note 22) have been excluded from the earnings per share calculation as such shares are currently accounted for as treasury shares.

13. Property and equipment

Group Furniture and Computer and Other Fixtures Equipment Total Cost: US$'000 US$'000 US$'000 At 1 January 2011

834 847 1,681

Acquisitions 3 247 250 Disposals - (30) (30) Exchange adjustment (3) (11) (14) At 31 December 2011 834 1,053 1,887 At 1 January 2012 834 1,053 1,887 Acquisitions 25 50 75 Disposals - - - At 31 December 2012 859 1,103 1,962 Depreciation and impairment: At 1 January 2011

624 712 1,336

Provided during the year 98 117 215 Disposals - (30) (30) Exchange adjustment (6) (6) (12) At 31 December 2011 716 793 1,509 At 1 January 2012 716 793 1,509 Provided during the year 28 161 189 Disposals - - - At 31 December 2012 744 954 1,698 Carrying amounts: At 31 December 2011 118 260 378 At 31 December 2012 115 149 264

There was no property and equipment in the Company.

Assets which were purchased at a historic cost of US$0.7 million and are fully depreciated are still being used by the company.


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14. Interests in Subsidiaries

Company US$’000 Cost At 1 January 2011 5,880 At 31 December 2011 5,880 At 1 January 2012 5,880 Addition - At 31 December 2012 5,880

Impairment At 1 January 2011 3,509 Charge for the year - At 31 December 2011 3,059 At 1 January 2012 3,059 Charge for the year - At 31 December 2012 3,059

US$’000 Carrying Amount At 31 December 2011 2,821 At 31 December 2012 2,821

Balances with subsidiaries are included within current assets and current liabilities within the parent company statement of financial position. The Company has agreed to provide ongoing financial support to one of its subsidiaries, Charlemagne Capital (Investments) Limited, in order to allow it to meet its liabilities as they fall due.

Particulars of the principal subsidiaries of the Company at 31 December 2012 are as follows:

Name Place of Incorporation/

Operation

Issued and Fully Paid Share

Capital

Percentage of Equity Interest Attributable

to the Company

Principal Activities

Direct Indirect Charlemagne Capital (IOM) Limited

Isle of Man Ordinary GBP20,000

100% - Investment Management

Charlemagne Capital (UK) Limited

United Kingdom Ordinary GBP100

100% - Investment Advice and Marketing

Charlemagne Capital (Investments) Limited

Isle of Man Ordinary GBP1

100% - Investment

Charlemagne Capital (Services) Limited


100% - Personnel

Charlemagne Capital (OCCO EE) Limited


50.1% - Internal Servicing Company


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15. Investments

31 December 2012 31 December 2011 US$’000 US$’000 Group Current investments – at fair value through profit or loss Equity securities in certain funds managed by Charlemagne Capital Group 1,810 1,451 Equity securities in certain funds managed by Charlemagne Capital Group held for deferred bonus payments

129

189

1,939 1,640

There were no investments held by the Company.

The group’s exposure to credit and market risks, and fair value information related to investments are disclosed in note 23.

16. Deferred Taxation

There is an unrecognised deferred taxation liability of US$5,059 (2011: unrecognised liability of US$2,412) representing the tax effect of depreciation in excess of capital allowances.

17. Trade and Other Receivables

Group Company 31 December 31 December 31 December 31 December 2012 2011 2012 2011 US$’000 US$’000 US$’000 US$’000 Trade customers 12,368 8,147 - - Other receivables 707 1,176 78 181 Prepayments 699 700 37 43 13,774 10,023 115 224

As at 31 December 2012, there were no margin deposits held by the Group (2011:$nil) in respect of the normal trading in currencies, futures and options (note 23).

The group’s exposure to credit and market risks, and impairment losses related to trade and other receivables are disclosed in note 23.


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18. Cash and Cash Equivalents

Group Company 31 December 31 December 31 December 31 December 2012 2011 2012 2011 US$’000 US$’000 US$’000 US$’000 Bank balances 101 131 3 23 Call deposits 14,029 15,152 1,623 6,268 Term deposits 13,836 10,811 5,527 7,067 Cash and cash equivalents 27,966 26,094 7,153 13,358

19. Trade and Other Payables

Group Company 31 December 31 December 31 December 31 December 2012 2011 2012 2011 US$’000 US$’000 US$’000 US$’000 Accrual for performance awards 9,187 6,172 - - Other accruals and payables 3,753 3,310 50 85 12,940 9,482 50 85

The group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in note 23.

20. Issued Share Capital

Shares 31 December 31 December 2012 2011 US$’000 US$’000 Authorised 2,000,000,000 ordinary shares of US$0.01 each 20,000 20,000 Issued and fully paid At beginning of year 280,385,616 (2011: 280,385,616) ordinary shares of US$0.01 each 2,804 2,804 Shares repurchased; nil (2011: nil) - - At end of year; 280,385,616(2011: 280,385,616) fully paid 2,804 2,804

During the year ended 31 December 2012 and 2011, the Company did not repurchase any of its own shares.

As at the date of signing the financial statements there were 280,385,616 (2011: 280,385,616) ordinary shares of US$0.01 each issued and fully paid.

Included within share capital are 1,409,076 (2011: 3,262,185) shares which are held on behalf of a subsidiary of the Company (see note 21). These are accounted for as treasury shares and are included as a debit reserve within equity.


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21. Share Capital and Reserves

Under Cayman Island law all categories of reserves are distributable. However, under normal circumstances the Company considers that only retained profits are distributable to shareholders. In the previous periods, the Company has repurchased some of its own shares. These shares were cancelled upon repurchase and accordingly the issued share capital of the Company was reduced by their nominal value. The premium on shares repurchased during 2009 was transferred to retained earnings.

The Board’s policy is to maintain an adequate capital base so as to maintain investor, creditor and market confidence and to sustain future development of business. The Board of Directors monitors the return on capital and the level of dividends to ordinary shareholders.

There were no changes to the Group’s approach to capital management during the year.

Two of the Company’s subsidiaries are subject to externally imposed capital requirements and are required to submit periodic returns summarising their financial resources. These companies have complied with relevant regulatory requirements in all material respects during the year.

22. Share Based Incentive Plans Equity Settled The Group has established several share based incentive programmes that entitle certain employees to acquire shares in the Company subject to the vesting conditions set out below at an exercise price that was set at the date of grant. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the vesting period. The amount recognised as an expense is adjusted to reflect the actual number of share options that are expected to vest. Grant Date Options

Issued Options Remaining

Vesting Conditions Contractual life of Options

21 November 2006 50,903 25,071 Equal parts vesting over three, four and five years service plus achievement of EPS performance targets

7 years

13 March 2007 134,851 74,917 Equal parts vesting over three, four and five years service plus achievement of EPS performance targets

7 Years

18 March 2008 200,000 66,666 Equal parts vesting over three, four and five years

service plus achievement of Assets under Management (AuM) performance targets

7 years

16 March 2011 2,561,010 2,498,510 One to three years service 3 years 16 March 2011 155,844 155,844 Three years service plus achievement of AuM

performance targets 10 years

25 October 2011 1,005,104 1,005,104 Two years service 2 years 11 January 2012 9,112,532 9,112,532 Two years service 2 years 4 May 2012 4,205,784 4,205,784 Two years service 2 years 26 September 2012 2,803,856 2,803,856 Three years service 3 years

Total Share Options

20,229,884

19,948,284

The number and weighted average exercise price of outstanding share options is as follows: Weighted average exercise price Number of Options Outstanding at beginning of period GBP0.03 5,178,780 Granted during the period GBP0.00 16,122,172 Vested during the period GBP0.00 (445,971) Failed to vest during the period GBP0.505 (66,667) Cancelled during the period GBP0.00 (840,030) Outstanding at the end of the period GBP0.007 19,948,284


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22. Share Based Incentive Plans (continued) Equity Settled (continued) The options outstanding at 31 December 2012 have an exercise price between GBPNil and GBP0.748 and a weighted average contractual life of 1.3 years. Outstanding share options are contingent upon specified performance and service criteria being satisfied. During the period 445,971 nil price share awards vested and were exercised. During the period 820,030 options were cancelled for cash of GBP92,546. In these instances the company had already recognised the full original fair values of these options as an expense in profit or loss. The Company did not recognise any gain in profit or loss where the cash award was less than the fair value of the options. During the period 20,000 options failed to meet the required service criteria. Amounts of GBP1,285 previously provided for these options were written back to profit or loss. During the period 66,667 options failed to meet the required performance criteria. Amounts of GBP7,191 previously provided for these options were written back to profit or loss. As at 31 December 2012 99,988 options had vested but had not been exercised. The average exercise price of these options is GBP0.74. The fair values of the options granted during the year are measured at the grant date using a Black-Scholes or binomial lattice model and spread over the vesting period of these schemes. The values are adjusted to reflect the actual number of shares that are expected to vest and recognised as an employee expense with a corresponding increase in equity. The weighted average fair value of the options issued during the period was GBP0.10 (2011: GBP0.15) The estimate of the fair value of the share options granted with a grant price of GBPNil and share awards granted has been calculated by reference to the face value of the award adjusted for the loss of dividends over the vesting period. All other options are measured using a binomial lattice model to estimate the early exercise behaviour. The contractual life of the options, 7-10 years, is used as an input to this model. Fair value of share options/awards and assumptions

21 Nov 2006 EPS

Targets

13 Mar 2007 EPS

Targets

18 Mar 2008 AuM

Targets

16 Mar 2011

Service Targets

16 Mar 2011 AuM

Targets

25 Oct 2011

Service Targets

11 Jan 2012

Service Targets

4 May 2012

Service Targets

26 Sep 2012

Service Targets

Fair value at measurement date (GBP)

0.20 0.21 0.14 0.172 0.059 0.113 0.104 0.097 0.073

Share price at grant date (GBP)

0.705 0.7475 0.505 0.1925 0.1925 0.125 0.115 0.108 0.085

Exercise price (GBP) 0.705 0.7475 0.505 Nil 0.1925

Nil Nil Nil Nil

Expected volatility (% p.a.) 40.0 40.0 37.4 60.0 60.0 60.0 60.0 60.0 60.0 Option life (years) 7 7 10 3 10 2 2 2 3 Assumed dividend yield (% p.a.)

5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0

Risk-free interest rate (% p.a.) 4.8 5.0 5.0 0.25 0.25 0.25

0.25 0.25 0.25

The Company’s shares were not traded before the initial options were granted. In setting the volatility assumption therefore regard was given to the share price volatilities of the Company’s closest traded comparator companies, as well as the share price since listing. Based on daily and weekly price observations, the share price volatility was estimated at around 50% which was comparable to that of its competitors over a longer period. For those options issued substantially after listing the share price volatility has been assumed to be 40% or 37.4% or 60% relating the average volatility between listing and the grant dates.


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22. Share Based Incentive Plans (continued) An employee of the Group holds a 49.9% minority interest in the shares of a group entity and has an option to acquire a further 12.6% of the shares in issue. The Group has retained an option to re-acquire the shares held by the employee for a nominal sum under certain conditions, should the employee’s option no longer be exercisable for any reason. As at the grant date, the Directors believe that the option granted to the employee had no significant value. All options involved in this arrangement expire on 31 December 2018. The share options are granted under service and non-market performance conditions. Such conditions are not taken into account in the grant date fair value measurement of the services received. There are no market conditions associated with the share option grants. Cash Settled At 1 January 2012 the trustees of the Charlemagne 2005 Employee Benefit Trust (EBT) held 3,262,185 Company shares with the intention that they would either be sold to satisfy existing cash settled awards as they vested or utilised to settle equity settled options as they vested and were exercised. The Trustee of the EBT may at its discretion allocate the proceeds to discretionary sub-trusts of which certain employees and their families are beneficiaries. During the year 750,000 shares were sold to satisfy cash settled options and 1,103,109 shares were transferred to employees in respect of share awards that had been exercised. The proceeds from the sale and transfers were less than the original cost of these shares and the difference of US$1.4 million was transferred from retained earnings to treasury shares within reserves. The 1,409,076 remaining shares held by the EBT had a fair value of US$190,335 as at 31 December 2012 (2011: US$541,866), based on the market price as at that date, after adjusting for the waiver of dividend rights at an assumed dividend yield of 5%. During the year 3,561,926 awards met their service criteria and the associated liabilities were met at fair market value. The fair value of the future cash settlement is spread over the vesting period, and recognised as an expense in the accounts with a corresponding increase in liabilities. The fair value is re-measured at each reporting date, with any adjustment in the cumulative fair value being recognised in the reporting period. Expenses in respect of share based incentive plans The following amounts have been charged as an expense within these financial statements: Year to

31 December 2012 US$

Year to 31 December 2011

US$ Equity settled incentive plans 1,306,648 (4,986) Amount relating to cash-settled transaction liabilities 196,216 (324,305) Total charged to employee costs 1,502,864 (329,291)

As at 31 December 2012, total liabilities in respect of cash-settled share-based incentive plans were US$nil (2011: US$437,069). No liabilities had vested by the end of the period. Included in the charge for equity settled incentive plans shown above were amounts totalling US$217,785 (2011: US$42,250) relating to directors.


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23. Financial Risk Management

Financial assets of the Group include cash and cash equivalents, investments and other receivables. Financial liabilities include accruals and other payables. The carrying amounts of these other assets approximate their fair values.

The Group operates a central Treasury function based upon weekly cash flow forecasts for each of the operating entities and the Group as a whole. This enables the regulatory liquidity requirements to be managed accurately for each entity subject to them. The Group normally operates a position of holding US dollars for all amounts in excess of working capital needs held in local currencies. Such balances are placed on deposit with major banks taking account of prudent spreading of risk. Where a decision is taken to hold local currency balances in excess of working capital needs, it is required that an Executive Director approves the position. All currency positions are formally monitored monthly by the Board as part of the Group’s reporting procedures.

The Group’s periodic use of derivatives is partly for hedging purposes, and partly for speculative investment. Where hedging is involved, the policy is fully or partly to match positions held in other assets. Speculative investment is carefully used, in accordance with parameters set by the Board, in short term situations where physical assets are inappropriate.

There is strict segregation between the investment management and deal settlement functions.

The Group has established a Group Risk Committee that reports to the directors and oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

In the course of the Group's normal trading in currencies, futures and options, margin deposits of varying amounts of cash are held by the Group's brokers. As at 31 December 2012, no margin deposits were held (2011: US$nil).

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group is exposed to liquidity risk to the extent that it holds stakes in certain financial instruments for which no developed market exists. Therefore, the Group might be unable to sell such stakes quickly at close to fair value. This risk is managed by the Group by means of cash flow planning to ensure that future cash requirements are anticipated and, where financial instruments have to be sold to meet these requirements, the process is carried out in a controlled manner intended to minimize the liquidity risk involved.

Residual contractual maturities of financial liabilities:

As at 31 December 2012 Falling due: less than 1 Month

Falling due: Between 1-3 Months

Falling due: more than 3 Months

US$’000 US$’000 US$’000 Trade Payables 1,561 - - Performance related awards 2,655 - 6,532 Other 526 672 994 Total 4,742 672 7,526

As at 31 December 2011 Falling due: less than 1 Month

Falling due: Between 1-3 Months

Falling due: more than 3 Months

US$’000 US$’000 US$’000 Trade Payables 1,181 - - Performance related awards 15 2,659 3,498 Share based incentive plan - 328 109 Other 943 293 456 Total 2,139 3,280 4,063


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23. Financial Risk Management (continued)

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

The majority of debtors arise from fund management and related activities of the Group. As such the Group is able to determine that the credit risk is considered minimal in relation to the majority of its debtors. For other debtors a credit evaluation is undertaken on a case by case basis. To reduce exposure to credit risk arising from non-performance by counterparties in derivative transactions, the Group’s policy is to transact business through brokers with high credit ratings wherever practicable. The Group invests available cash and cash equivalents with various banks. The Group is exposed to credit-related losses in the event of non-performance by counterparties to financial instruments but, given their high credit ratings, management does not expect any counterparty to fail to meet its obligations.

At the reporting date, the maximium credit exposure of the Group’s financial assets exposed to credit risk amounted to the following:

As at 31 December 2012 Neither past due or Impaired

Past due: 1-30 days

Past due: 31-90 days

Past due: more than 90

days US$’000 US$’000 US$’000 US$’000 Amounts due from funds 11,863 - - 910 Interest and other receivables 236 - 276 489 Cash and cash equivalents 27,966 - - - Total 40,065 - 276 1,399

As at 31 December 2011 Neither past

due or Impaired

Past due: 1-30 days

Past due: 31-90 days

Past due: more than 90

days US$’000 US$’000 US$’000 US$’000 Amounts due from funds 8,428 - - 476 Interest and other receivables 276 - 250 515 Cash and cash equivalents 26,094 - - - Total 34,798 - 250 991

The credit risk on transactions with funds primarily relates to transactions awaiting settlement. This risk is considered low due to the short settlement period involved and the high credit quality of the funds involved. Included in receivables past due more than 90 days are amounts totalling US$397,683 (2011: US$558,733) after allowing for a total impairment provision of US$740,097 (2011: US$ 701,216).

The cash and cash equivalents held by the Group are held by a number of international banks and it is the Group’s policy to avoid concentrating credit risk in any one institution. .

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and equity prices will affect the Group’s income or the value of its holding of financial instruments.

The Group is exposed to market risk directly via its investment holdings and indirectly via assets under its management, from which its fee income is derived. As the investments held directly and indirectly are mostly in the emerging markets, there is a concentration of this risk and any general movement in these markets would have a significant impact on the Group’s income and the value of the Group’s investments. Investments subject directly to market risk which are held at fair value amount to US$1,939,000. If the value of these investments, as at 31 December 2012, increased by 1% the profit of the Group would be increased by US$19,390. A decrease of 1% would have had an equal and opposite effect.


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Foreign currency risk

The Group is exposed to foreign currency risk on investments and expenses denominated in currencies other than US Dollars. The Group will normally hedge large exposures to foreign currency risk by using forward exchange contracts.

In respect of monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short term imbalances.

The Group’s exposure as at the reporting date was as follows:

31 December 2012 31 December 2011 AUD EUR GBP AUD EUR GBP USD ‘ 000s equivalent US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Cash and Cash Equivalents 9 121 149 34 114 3,042 Investments - 5 204 - - 249 Trade Debtors - 1,594 264 223 1,185 1,729 Trade Creditors - (528) (825) (33) (573) (2,029) Total 9 1,192 (208) 224 726 2,991

As at 31 December 2012, had the US Dollar strengthened by 1% in relation to all other currencies, with all other variables held constant, the net assets of the Group would have been decreased in both profit and equity by US$9,930 (2011: US$39,410). A weakening of the US Dollar by 1% against the above currencies would have had an equal and opposite effect.

Interest rate risk

The Group is exposed to interest rate risk with regard to holdings in cash and cash equivalents. All cash holdings and cash equivalents are held at maturity dates and at variable rates. The Group does not have any borrowings. Surplus funds are placed on short term deposit.

Other price risk

Price risk arises from equity securities held by the Group. As at the reporting date these assets amounted to the following:

Investment Assets 31 December 2012 31 December 2011 US$’000 US$’000 Assets held for trading: Equities – Listed 1,716 1,357 Equities – Unlisted 223 283 Total Investment Assets 1,939 1,640

The majority of the Group’s investments are readily realisable into cash. A 3% increase in the reported market price of these assets at the reporting date would lead to a US$58,170 increase in the value of those investments (2011: US$49,200). An equal and opposite decrease in the reported Net Asset Values would have decreased the value of the investments by an equal and opposite amount.


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Fair value hierarchy

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level of the fair value hierachy (see note 2)

31 December 2012 Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000 Assets held for trading: - 1,939 - 1,939

31 December 2011 Level 1 Level 2 Level 3 Total US$’000 US$’000 US$’000 US$’000 Assets held for trading: - 1,640 - 1,640

24. Operating Leases

At the end of the reporting period, the future minimum lease payments under operating lease commitments during the next twelve months are as follows:

31 December 2012 31 December 2011 US$’000 US$’000 Group Property, expiring: Within 1 year - - In the second to fifth years, inclusive 491 - Over five years 158 622

The group leases a number of offices under operating leases. The lease terms vary between 5 years to 15 years. One of the 5 year leases has an option to break after 3 years and the 15 year lease has an option to break after 7th year. During the year an amount of US$643k was recognised as expense in profit or loss in respect of operating leases (2011: US$664k). The rent paid to the landlord is increased to market rent at intervals as stated in lease agreements and the Group does not participate in the residual value of the office as all the risks and rewards of the offices are with the landlords.

25. Amounts due to and from Subsidiaries

The amounts due to and from subsidiaries are unsecured, repayable on demand and bear interest at commercial rates.


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26. Critical accounting estimates, and judgement in applying accounting policies

The Directors considered the development, selection and disclosure of the Group’s critical accounting policies and estimates and the application of these policies and estimates. Estimates and judgements are continually evaluated and are based on historical and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Fair value of financial instruments

The fair value of financial instruments that are not quoted in an active market are determined by the Directors by using valuation techniques.

Where valuation techniques are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. To the extent practical, models use only observable data. However areas such as credit risk, volatilities and correlations require the Directors to make estimates. Changes to the assumptions about these factors could affect reported fair values of financial instruments.

27. Contingent Liabilities

The Group has no significant contingent liabilities.


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DIRECTORS OF PRINCIPAL SUBSIDIARIES

CHARLEMAGNE CAPITAL (IOM) LIMITED

Asset management company in the Isle of Man

Directors are:

James Mellon (Chairman) Anderson Whamond (Non-Executive)

Philip B. Games (Non-Executive) Jane McAndry (Managing)

Adrian Jones Lloyd Jones

CHARLEMAGNE CAPITAL (UK) LIMITED

Investment advisory and marketing company in the UK

Directors are:

Sir James Mellon KCMG (Non-Executive Chairman) N. Jonathan Bradley (Non-Executive)

Jane McAndry Vicky Kydoniefs

Varda Lotan Julian P. Mayo Gabor Sitanyi

CHARLEMAGNE CAPITAL (SERVICES) LIMITED

Global employment company in the Isle of Man

Directors are:

Jane McAndry Adrian Jones Lloyd Jones

Anderson Whamond

CHARLEMAGNE CAPITAL (INVESTMENTS) LIMITED

Investment and subsidiary holding company in the Isle of Man

Directors are:

Jane McAndry Adrian Jones Lloyd Jones

CHARLEMAGNE CAPITAL (OCCO EE) LIMITED

Internal servicing company in the Isle of Man

Directors are:

Jane McAndry Adrian Jones Andrew Wiles

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